Nuclear Costs in Context
Prepared by the
Nuclear Energy Institute
April 2016
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the nuclear energy industry’s
policy organization.
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© 2016 Nuclear Energy Institute
Total Generating Costs
In 2015, the average total
generating cost for nuclear
energy was $35.50 per
megawatt-hour. Total
generating costs include
capital, fuel and operating
costs – all the costs
necessary to produce
electricity from a nuclear
power plant. Cost information
for the U.S. nuclear fleet is
collected by the Electric Utility
Cost Group with prior years
converted to 2015 dollars for more accurate historical comparisons.
Three-quarters of nuclear power in the U.S. comes from plants with multiple
reactors. The ability to spread costs over a greater amount of electricity production
means that the generating
cost at multi-unit sites is
generally lower than at
single-unit plants. In 2015,
the total generating cost at
multi-unit plants was $32.90
per megawatt-hour compared
to $44.52 for single-unit
plants.
The 2015 generating costs
were 2.4 percent lower than
in 2014 and almost 11
percent below the 2012
costs. Prior to the 2012 peak,
nuclear generating costs had
increased steadily over the
previous decade. Between 2002 and 2015, fuel costs increased 21 percent, capital
expenditures by 103 percent, operating costs by 11 percent (in 2015 dollars per
megawatt-hour). Total generating costs are up 26 percent in the last 13 years.
Capital
Industrywide capital spending increased from $4.4 billion a year in 2006 (2015
dollars), peaked at $8.7 billion in 2012, and dropped to $6.25 billion in 2015.
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Capital investment took a step change up in about 2003, leveled off for several
years, then took another step change in 2009 and has declined over the last two
years. These inflections are the result of a few major items: a series of vessel head
replacements, steam generator replacements and other upgrades as companies
prepared their plants for operation after the initial 40-year license, and power
uprates to increase output from existing plants. As a result of these investments, 81
of the 99 operating reactors have received twenty-year license renewals and 92 of
the operating reactors have been approved for uprates that have added over 7,000
megawatts of capacity.
Capital spending on uprates and items necessary for operation beyond 40 years
should moderate as most plants complete these efforts. Capital investments in
uprates peaked at $2.5 billion in 2012 but declined to $315 million in 2014. This
decline has been offset in other areas where spending has increased. Capital
spending to meet regulatory requirements was around $1 billion in 2007 and 2008
before jumping to $1.8 billion in 2010 and holding near that level until reaching a
peak of almost $2 billion in 2014. This increase began with significant investments
post-9/11 to enhance security, followed by expenditures for post-Fukushima items,
which totaled $1 billion in 2014. As the industry completes Fukushima-related safety
upgrades, regulatory capex should also moderate, and revert toward 2007-2008
levels. A further breakdown of capital costs for 2015 will be available at a later date.
Operations
Operations costs increased over the last twelve years from $18.59 per megawatthour in 2002 to $20.92 per megawatt-hour in 2014. Operations costs have declined
4 percent from the peak in 2011.
This increase in operations costs was not driven by any single category. Operations
costs in the 2002-2008 periods are similar to where money was being spent in the
2009-2014 period. However, operations costs have remained flat compared to the
past decade. Between 2006 and 2010, operations costs increased 16 percent while,
over the past five years, the increase was only 1 percent. A further breakdown of
operations costs for 2015 will be available at a later date.
Fuel
Fuel costs represent 15-20 percent of the total generating cost. Fuel costs
experienced a relatively rapid increase from 2009 to 2013. This was largely the
result of an escalation in uranium prices that peaked in 2008. Since uranium is
purchased far in advance of refueling and resides in the reactor for four to six years,
the effect of this commodity price spike persists for a long time after the price
increase actually occurred.
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Economic Pressures Facing Nuclear Plants
Since 2013, five nuclear reactors (Crystal River 3 in Florida, San Onofre 2 and 3 in
California, Kewaunee in Wisconsin, and Vermont Yankee) have shut down
permanently. Entergy announced in October 2015 that it would close its Pilgrim
plant in Massachusetts by June 2019, and possibly sooner. And in February 2016,
Entergy announced that it would shut down its FitzPatrick nuclear plant in upstate
New York in early 2017.
Crystal River and San Onofre shut down due to failed steam generator replacements
– unique situations that are unlikely to be repeated. Since the Surry nuclear power
plant in Virginia replaced its steam generators in the early 1980s, approximately 110
reactors around the world have replaced their steam generators (including 57
reactors in the United States), in what has become a routine practice.
Kewaunee, Vermont Yankee, Pilgrim and FitzPatrick – all in competitive markets –
fell victim to a combination of market-related factors (and, in some cases, a
combination of several factors), including:

Sustained low natural gas prices, which are suppressing prices in wholesale
power markets, and will continue to do so.

Relatively low growth (in some markets, no growth) in electricity demand due
partly to subpar economic performance since the 2008 recession, partly to
greater efficiency.

Federal and state mandates for renewable generation, which suppress prices,
particularly during off-peak hours (when wind generation is highest and the
electricity is needed the least). For example, the federal production tax credit
allows wind producers to bid negative prices, which places baseload plants at
a disadvantage. Some nuclear plants in Illinois see negative prices as much
as 10-11 percent of the off-peak hours and 5-6 percent of all hours.

Transmission constraints, which require a power plant to pay a congestion
charge or penalty to move its power on to the grid. Certain nuclear plants at
particularly congested points on the grid pay a penalty of $6-9 per megawatthour to move their power out.

Market designs that do not compensate the baseload nuclear plants for the
value they provide to the grid, and market policies and practices – e.g.,
reliance on out-of-market revenues – that tend to suppress prices.
The Kewaunee, Vermont Yankee, Pilgrim and FitzPatrick nuclear plants are the only
casualties to date, but there are other nuclear stations at risk.
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Economic Impact of Nuclear Plant Closures
Kewaunee and Vermont Yankee were both highly reliable plants with high capacity
factors and relatively low generating costs. Allowing these facilities to close will have
long-term economic consequences: replacement generating capacity, when needed,
will produce more costly electricity, fewer jobs that will pay less, and more pollution.
In 2015, on average, U.S. nuclear power plants produced electricity for almost $36
per megawatt-hour. The smaller single-unit plants like Kewaunee and Vermont
Yankee were a little more costly – about $44 per megawatt-hour. The larger, multiunit sites were less costly – in the $33 per megawatt-hour range. The electricity
these plants produces will likely be replaced with either combined cycle gas-fired
capacity at a levelized cost of over $70 per megawatt-hour (see graph, “Better Deal
for Consumers ... Existing Nuclear or New Combined Cycle Gas?”).
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